Refused debt forgiveness, Ukraine is facing bankruptcy

The four largest private creditors, which hold two-thirds of Ukraine's $15.3 billion debt owed to individual creditors, have refused to forgive Kiev's debts, pushing the country through civil war toward bankruptcy.

A supermarket in Ukraine. (Source: aisberg.com).

In a statement published in the Financial Times, the committee of creditors holding Ukraine's bonds said that the Kiev government's proposal to write off its debt would send a signal to global financial markets that the government could allow itself to refuse to pay its debt obligations.

Private creditors have proposed that Kiev use central bank reserves to pay off its debts, but the International Monetary Fund (IMF) has strongly criticized this idea.

Previously, Kiev asked a group of major US financial corporations - Ukraine's four largest private creditors - to extend debt and reduce interest rates for the country in the context that Kiev had to allocate financial resources for the military campaign in eastern Ukraine.

Under that proposal, creditors would only get back about 40% of the money they lent.

Kiev argues that when lending, creditors were betting on the sovereign bonds of the former government, which was allied with Russia, so when that government was overthrown in 2014, they should bear some of the losses from that coup.

Negotiations between Ukraine's largest private creditors and the Kiev government that would reduce the country's borrowing costs by $15.3 billion over the next four years have stalled and Ukraine is at risk of default. Ukrainian Prime Minister Arseniy Yatsenyuk has said he would freeze debt payments if debt restructuring talks fail.

On June 18, Ukraine will have to pay 39 million USD to its creditors if it wants to continue negotiating the restructuring of the 15.3 billion USD./.

(VN+)